As if there weren't sufficient causes already to refer to CIT Group (NYSE: CIT) as "beleaguered," the list just got longer. This morning, the financial services firm delayed filing its second-quarter report with the Securities and Exchange Commission (SEC), citing the ongoing restructuring of its debt as a mitigating factor.
Specifically, CIT told the regulatory agency that it could not meet Monday's 10-Q deadline "without unreasonable effort and expense," since executives have been spending most of their time lately attending to restructuring needs. The company is expecting a second-quarter loss in excess of $1.5 billion, thanks in large part to a loss totaling $2.1 billion from its discontinued home-lending operations.
Additionally, CIT warned of "substantial doubt" regarding its ability to continue as a going concern, due to "on-going stress in the credit markets, operating losses, credit ratings downgrades, and regulatory and cash restrictions." According to the firm, an inability to complete its debt tender or arrange other financing could result in a bankruptcy filing.
In light of today's harsh dose of reality, CIT is set to return some of the healthy gains it collected amid last week's rally. However, it's worth noting that the recent surge higher was stopped short by CIT's descending 20-week moving average, which hasn't been toppled on a weekly closing basis since June 5.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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